Industry Insights

A Quick Guide to Setting up a Retirement Plan


When embarking on a mission to set up a company retirement plan, a business owner is faced with industry jargon, confusing Department of Labor regulations, and lack of transparency that all collide to create an overwhelming experience.

Here are a few tips on how to simplify retirement planning.

  • Start by identifying a Registered Investment Advisor who is willing to take on the role of a 3(38) advisor. A 3(38) advisor will help relieve you of the investment liability when selecting the investments for your company. Short of hiring a 3(38) advisor, you will shoulder the burden of selecting the menu and thus maintaining full liability for the investment choices in your company plan. As your company grows, this will become even more important.
  • Stay away from insurance-based plans. They are generally more expensive and have multiple layers of fees. Additionally, insurance-based plans lack the transparency needed to administer your plan in a prudent manner.
  • Work with an advisor who is proactive in the plan design phase and is willing to run scenario analysis to create the optimal plan for your company. This should include looking at plan features such as safe harbor, company match, and profit sharing. It may also include new comparability and age based approaches. Plan design will affect your company’s ability to recruit and retain qualified employees. While identifying your needs and appropriate plan features, a knowledgeable advisor will determine for you if a 401(k) is the right vehicle or perhaps the SIMPLE IRA or SEP IRA is a better option.
  • A good advisor/investment firm will work with qualified ERISA attorneys and other experts to ensure you are maximizing your company dollars, and make certain that you are compliant with the new Department of Labor regulations, 408(b)(2) and 404(a)(5).
  • Make sure your retirement plan includes index funds or exchange traded funds which are substantially less expensive than actively managed mutual funds. Furthermore, long-term studies suggest your performance will be better when utilizing an index-based approach.

This guide will provide a base from which you should be able to start constructing a retirement plan that will help your most valuable assets (your employees) save for a dignified retirement. It is imperative that you work with a qualified, proactive financial advisor who can simplify this otherwise complex task.

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